Lagging behind those in the G7 countries, Australian investors should have a greater focus on bond allocations, according to one fixed income investment expert.
Traditionally, advisers and their clients have found bonds more difficult to understand because there is no listed exchange, said George Vassos, managing director of specialist fixed income investment manager, Omega Global Investors.
“Bonds have a real role to play as a risk control in a portfolio and also as a diversifier,” Mr Vassos told InvestorDaily.
Investors and advisers, he explained, should look at how the G7 countries allocate bonds in their portfolios, and should avoid the bias of Australian shares, for a more balanced portfolio.
“Adding bonds in there acts as a good diversifier,” he said. “I think that a higher allocation to shares made sense when a lot of investors were in the accumulation phase of their retirement, but now they’re moving into a retention phase and there is a focus on income. That is where bonds have a real role.”
Last week, the fixed income investment manager said it does anticipate increased demand for Asian corporate bonds due to decoupling of the Asian and European markets earlier in 2012.
Corporate bonds are underpinned by strong fundamentals, bringing with them a strong, long-term positive outlook, Mr Vassos said.
“We expect to see an increased demand for Asian corporate bonds over the coming year as growth in the region continues,” he said.
“We’re particularly looking at corporations issuing bonds in countries such as Malaysia, Thailand, Taiwan, Korea and Singapore that are showing signs of maintaining that growth over the next few years.”
Mr Vassos added that Asian corporations have strong balance sheets when compared with their global sector peers – and with less risk – which makes them an attractive option for investors looking for superior risk-adjusted returns.
